Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

July 22, 2013

Q: I had a 457(k) withdrawal of $50,000. The IRS wants me to pay $20,000 in penalties, which is almost half of what I took out. How do I put a stress claim in?

lamar
sacramento

A: A 457 plan is a deferred compensation plan, usually sponsored by government entities. Assuming you received a distribution from a 457 plan, that distribution would be subject to income tax withholding. The federal withholding rules require that 10 percent of non-periodic distributions be withheld for federal income tax. If the distribution is a rollover distribution, 20 percent must be withheld for federal income tax.

Generally, you cannot receive distributions from a 457 plan until you reach age 70 and 1/2, have severance from employment, or are faced with an unforeseeable emergency. Unforeseeable emergencies include: imminent foreclosure or eviction from your primary residence; medical expenses; and funeral expenses of a family member.

There is no "stress claim" provision that eliminates the income tax on a distribution from a 457 plan. You will have to pay federal and, most likely, state income tax on the distribution.

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Meet Our Financial Experts

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Gregory Burke, a CPA and tax expert with John Waddell & Co. inÂ Sacramento since 1984, worked as an IRS tax auditor for six years. Heâ€™s aÂ past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.